Bloomberg News

Warnaco Group 4th-Quarter Net Income Falls 42 Percent

February 27, 2006

Warnaco Group Inc., the maker of Calvin Klein jeans and Speedo swimwear, said fourth-quarter net income fell 42 percent because of sagging swimwear sales and rising pension and marketing costs.

Net income fell to $9.4 million, or 20 cents a share, from $16.2 million, or 35 cents, a year earlier, the New York-based company said today in a statement. Warnaco was expected to earn 24 cents, the average estimate of seven analysts surveyed by Thomson Financial. Thomson doesn't disclose what its estimates include or exclude.

Warnaco's gross profit margin ``was 50 basis points above our forecast and up 150 basis points versus fourth-quarter 2004,'' Banc of America Securities LLC analyst Robert Ohmes wrote in a report today.

Ohmes said Warnaco's high-margin clothing lines, including Ocean Pacific swimwear, and better inventory management that requires less discounting of merchandise, ``should drive further margin expansion.''

The company had pension costs of $1 million in the quarter, compared with pension income of $7.8 million a year ago. Selling, general, and administrative expenses rose to $106 million from $99.5 million, the company said.

Warnaco's per-share earnings will be helped this year by the January acquisition of New York-based Calvin Klein Inc.'s jeans and sportswear businesses in Europe and Asia, Chief Financial Officer Larry Rutkowski said in the statement.

Fourth-quarter sales fell 3 percent to $363 million from $374 million. Rutkowski said 2006 sales growth, without the Calvin Klein acquisitions, will be ``similar to 2005,'' and with the acquisitions will be ``at least in the low 20 percent range.''

Warnaco shares rose 48 cents, or 2.1 percent, to $23.27 at 4 p.m. New York time in Nasdaq Stock Market composite trading. They have fallen 2.7 percent in the past year.

To contact the reporter for this story: Shannon D. Harrington in New York at

To contact the editor responsible for this story: Glenn Holdcraft at

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